Is 2018 budget from same template for slow death? – Henry Boyo

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NIGERIANS habitually look forward to the budget process with much expectation that ‘things’ will become “better”, once the annual budget is passed and duly implemented.

Regrettably, however, Nigeria’s fiscal plans, do not become law until, well into each accounting year; consequently, comprehensive implementation of capital projects, within the budget year, becomes a serious challenge; ultimately, projects may be abandoned, while funds allocated also become difficult to account for.

Hereafter, some salient aspects of the 2018 Appropriation bill will be addressed in the following interview format:

Buhari presenting 2018 budget to joint NASS session

In what way is the 2018 budget different from earlier fiscal plans that failed to stimulate inclusive growth?

The 2018 Appropriation bill is nominally, Nigeria’s highest ever annual fiscal plan; in real value terms, however the N8.66Tn budget may not be worth more than the 2011 budget of N4.48Tn when Naira was N150=$1.

Nonetheless, apart from size, the 2018 budget structure is actually, the standard template adopted for decades; for example, despite reports of copious house cleaning and the benefit of over N20bn monthly savings from deletion of ghost salaries and other allegedly, plugged revenue leakages, and reported refunds and seizures of stolen public funds, etc, recurrent consumption still accounts for about 70% of total annual expenditure.

Furthermore, the 2018 budget, is, similarly, also predicated on deficit financing; thus, in the absence of savings, government will continue to borrow, so that it can spend more than its actual earnings; the current Appropriation bill is inexplicably also, similarly silent, on the often unbudgeted and unauthorized allocations to subsidize present petrol price of N142/litre.

Although the 2018 budget was laid marginally earlier this year, it will nonetheless still fail, to align and synchronize capital budget implementation with the institutionalized January-December calendar year. Sadly, with up to 4 months unforced delay in budget passage, capital budget implementation will once again, become hurriedly compressed into less than 9 months, to invariably, jeopardize accountability in the ultimate use of funds, and in project quality.

Shouldn’t the highest ever budget of N8.66Tn for 2018 inspire hope that the economy will be well funded and social welfare should improve?

Unfortunately, there is the popular misconception that bigger budgets should translate into better chances of poverty reductions. But in reality, this has not been so; clearly, the incremental budget process has steadily bloated annual budgets, from less than 2Tn in 2008 to N7.28Tn in 2017, with no meaningful positive social impact. Besides, in real terms the 2011 budget of N4.48Tn (when Naira was N150 =$1) is probably more in real value than the much higher N8.66Tn in 2018, when Naira exchange for above N305-60 =$1.    So, we must not be fooled by quantum leaps in budget spending, as this is inevitable, if inflation remains in higher single digits, and if CBN continues to bet against its own currency, with its regular auctions of dollars against Naira.

In view of the much reduced export income from crude oil, isn’t it expedient that government should borrow heavily to fund the budget deficit?

Yes, you borrow, if you can, when it is expedient, but you must sensibly hesitate to increase your indebtedness, if you already require up to 50% of your total actual income to service existing debts. Any advice to step up borrowing in such circumstances, should be seen as enemy action, particularly when, there is barely any tangible impact from the application of earlier loans. Expectedly, the N1.699Tn projected 2018 deficit, will propel an already oppressive national debt, beyond $70bn to further compel larger allocations of scarce revenue for debt service in latter years; ultimately, Nigeria will be unsustainably locked into more borrowing, to service increasing debt obligations every year hereafter.

The non availability of cheaper funds locally seems to have encouraged Mr. President’s preference for a 60% shift to foreign loans. However, in addition to the current bid to borrow $3bn externally, will Government borrow more externally to fund the 2018 budget?

The Finance Minster has also clearly expressed preference for foreign loans, because she believes they cost lower with rates around 7%. However, it would probably be more responsible for the Minister to carefully interrogate, why cost of funds remain in higher double digits in her own country, so as to also bring Nigeria’s borrowings in line with best practice rates, where sensible governments generally pay well below 2% on their loans.

Ironically, the Minister has suggested that we could even save up to (N91.65bn) from the present loan request for $3bn before parliament! In reality, foreign loans, over which government has no control, can ultimately expose us to forcible manipulation by economic imperialists, who will, as usually, demand their pound of flesh. Besides, Nigerians should also demand a sensible explanation why government borrows dollars externally at 7%, when our own CBN sits comfortably on billions of dollars, which it sells to banks and liberally allocates to BDCs, while it also compulsively borrows to mop and sterilise excess Naira liquidity from the market with inappropriately interest rates, when the productive private sector is clearly denied access to cheaper funds.

Nigerians, should be concerned that if Naira rate tumbled from below N100 to N305 since 1998, a Naira rate beyond N1000/$1 is clearly also feasible, if the perennial, systemic challenge of surplus Naira liquidity continues to be compounded with CBN’s dollar auctions.

How do you rate some of the sectoral allocations? It seems Power, Works and Housing, have the largest share of N555.88bn

I have long given up using the size of sectoral allocations as an index of development expectations. It doesn’t work like that, because when hundreds of billions are reported to be allocated annually to various MDAs, you still never see the difference, that the bigger allocations make! However, the sum of N555.88bn ($1.5bn) for Housing, Works and Power is clearly inadequate for these three critical sectors; for example, power alone, according to sectoral experts, requires over $100bn to stabilize supply. The reality of course, is that it is not often recognized that government capital spending will always remain marginal, in value, in relation to the expanded funding requirements in major sectors like Aviation, Shipping, Railways, and Refineries etc.

The truth is that it is private sector activities, that actually drive successful economies; for this reason, availability of funds for private sector investments is invariably infinitely elastic, if the right government policies prevail. Consequently, it is rather inexplicable that government does not appear fully committed to concession as a way of remediating our infrastructural deficit, nor is there any commitment to UNESCO’s recommendation for Education to be allocated over 25% of total expenditure.

SAVE THE NAIRA!! SAVE NIGERIANS!!!

 

 

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